Open Forum | Main Street Business Podcast |

Welcome everybody to today's open forum with yours truly, Mark Kohler and my amazing co host Matt Sorenson. Tax rock stars. That's what we're shooting for. I've got my rock star drink. That's your only qualification to be a tax rock star. Yeah.

All you need is like 199 and you too can be a tax rock star at your local convenience store.

Sometimes two for $3. And bring a friend, you know. Yeah. So, yep, that's our drink of choice here at the Main Street Business Podcast. This is our open forum. We do it about every three weeks. We'd like to welcome any of you that are new listeners. We're trying to get the new platform disseminated across the universe as efficiently as possible. This transition to the new name has been challenging. So all of you that may have had to track us down a little bit over the last few weeks, we want to say thank you for your persistence. This show today is going to be well worth it. We got some sweet questions from America from you, the Main street business owners and I think a lot of you are going to benefit from some of these.

Yeah. And this is fun for us. You know, Mark and I have consulted thousands of clients over the years on tax and legal planning and we are in the trenches ourselves as small business owners. So we think we have a good insight on this. You can be the judge, but this is kind of how we do our consults with our clients and we're trying to do and in our law firm, KQL Sawyers, just do some good business and tax planning and helping clients with tax returns at Kmark's got a CPA firm, knee CPAs. So you can always write in your questions at Matt Metkqs lawyers or Markqs lawyers. We're beefing up the website@mainstreetbusiness.com where you can leave questions and we've got a lot today. We have a lot of good questions, a lot of variety actually from starting up a new business and entity planning to PPP loan questions for those that did a paycheck protection program to some self directed questions, Roth IRA questions, all the crap we love actually. It's my favorite stuff.

Yeah, it's gonna be good. We try to keep it light. Please be patient. And with us and we were just talking yesterday, we've got to make the Main Street Business podcast page more user friendly and easier for people to leave questions. And then we get a ton of questions. We're like, maybe we shouldn't make it that easy. You Know those people that really fight through it to get their question in?

Yeah, that's how we're filtering these right now.

Those that put up with all the pain. Okay, we're going to jump right to it. Also, one of our strategic partners Matt did not mention was directed ira.com. so if you want one stop shop with a highly coordinated IRA 401k type TPA custodian trust company to help you have it coordinated with your accounting or your law firm and the entity setups and what you're self directing. That's what we've been doing 15 plus years. We have directed Ira that you can set up accounts on in the middle of the night in your underwear and the next day be self directing like a rock star.

Yeah. Directed ira.com and we have the Directed Ira podcast, which we've got a lot of shows we've already recorded that are getting uploaded. There's one in there now, so if you want to get over there. For those of you that I know, many of the open forum listeners here self direct their accounts because we got a lot of questions on it. So might as well start announcing that now just for Directed Ira podcast.

Yeah. Let me say this and then I'll read our first question, which happens to be a Roth IRA question. I want to preface it with an important statement, but I'll throw this out for those of you that want to geek out on self directing and I shouldn't say geek out, want to do it and effectively. Please subscribe to our Directed Ira podcast. You can go right now to itunes or Stitcher and just type Directed ira and our podcast will come right up. Please subscribe. You'll be able to binge on more and more shows that are specific to self directing. Now on this podcast, we're still going to cover it. We're still going to hit it because it's an important part of a well designed tax plan and asset protection plan for anybody in America that's trying to live the dream. So we're still going to hit it here, but when you want to dive deep, get over to those that podcast. All right, Matt, I got a question from Bill Mann, a regular listener in

Tennessee, and gonna be a hard question. I can already tell it's not an easy one, huh?

No, I think it's kind of easy. Bill usually throws out some hard ones,

but yeah, Bill does not. He doesn't suffer fools. He doesn't send an easy question.

Yeah, yeah, yeah. He doesn't pull any punches. Okay. So he says, may I withdraw now? Oh, here's my preface. I wanted to give everybody. I am teaching more and more in my business owner workshops in my webinars. And this weekend I have my basic on Friday, my advanced on Saturday. I'll be doing it again in November and in December. You can zoom in live Q and A and it's recorded. Very affordable. Two days of education under 500 bucks and you can choose the day that fits you. For those of you that have been to a class of mine before, you would love the advanced session on Saturday. Now, that was somewhat of a shameless plug, but on the basic day, I spend the first hour and a half just talking about the principle of getting out of debt saving and how every one of our clients and their children and their mom and dad and their partner or spouse should have a Roth ira. It should be an integral part. It's almost like the starter on an engine for a car. You can't drive the car without having a Roth IRA in your question, in your equation. Matt and I Both have Roth IRAs, people. You can fund them at any income level and you can fund them even if you have a 401k at work. Now, some of you are like, you're wrong on both those points. No, we're not. We can talk about that later. But Bill's question is about the Roth ira, which I love, so I'm going to jump to it. So we geek out on Roths. Matt and I debate sometimes. I think the health savings account is better than the Roth. We duke it out in the ring. I box and do Croft. Yeah. Bruce Willis fan for boxing. And. Yeah. So, yeah.

Marks Mark's turn to the. I think Mark's waiting for like a fight, you know, so just any of you out there. Mark's been like, boxing, he's been doing. Was it Krav Magra? I don't even know how to say it. He owns a lot of firearms, so you better, you know, don't piss off Mark. He's just like, got a lot of training. He's ready to use.

Yes. I'm gearing up for the apocalypse now. I am not a prepper and I really don't. I don't geek out on guns, people. I want to make sure I've got a handgun, a rifle, maybe I'll go shoot a deer this year. I don't even know. But that's a whole other topic. But please do not think I'm some gun fanatic. But I think self defense is very.

Not there's anything wrong with that.

That's not that there is anything wrong.

There's anything wrong with that.

Yeah, I've got a fight. There's a fine line when you start bringing up firearms. But. But I'm not extreme on either level. I'm just gonna say that in life I try to be balanced. But anyway, I think self defense is awesome. And Liam Neeson in Taken 1, 2, and 3, all of his moves are Krav Maga. And you can learn it. People, be safe at the, you know, when you're at the gas station filling up, you might have to defend your spouse's honor. Matt would get beat up like a little schoolgirl. I would be there like Liam Neeson taking down the Russian mafia. Just. I'd do that. I do that for you, Matt.

I appreciate that.

I'm Matt's wingman. Okay, here's the question. Bill Mann in Tennessee, if I withdraw Roth IRA conversion dollars out of my Roth IRA before I'm age 59 and a half, is it tax and penalty free? Now I'm gonna pose this question to Matt.

Conversion dollars?

Yes. Okay, now let me pose this for everybody. When you open a Roth IRA and say, put $1,000 on it, and then it grows over three years and now it's worth $2,000, let's say you can always pull out your contribution that initial thousand dollars tax free or penalty free anytime you want. But the growth, you have to wait until you're 59 and a half. I was actually really interested here, Matt's comment on this, because some people will form a traditional IRA and then convert it to Roth, pay the tax, convert it to a Roth, and then let it grow tax free until they're 59 and a half. But Matt, Bill wants to know, and so do I, can I pull out the dollars I converted to Roth tax free and penalty free because I paid the tax on them. Yes or no?

No, you cannot. You have to wait five years.

Oh, but, but before 59 and a half. I can. If I wait five years. Or do I have to wait till the later of five years or 59 and a half? It's probably later.

So. All right, so you're. Tell me, let's start how old you are. So you're 50. You do a Roth conversion of $10,000. Okay.

Pay my tax, pay your tax.

And now Your account's worth $11,000 a year later, let's say. And you want to take out the 10 you converted.

Yes. Penalty and tax free.

Okay, so you haven't met the five year rule. Okay, I don't think you can pull it out yet. Actually, I don't know. I didn't get that question. I missed. I missed. I actually, I think it got sent to me and I missed it because I would have definitely looked that one up.

I got to tell all of you

because there's five year rules. Here's the thing. There are two five year rules. There's a five year conversion rule and there's a five year contribution rule. And they're actually different. So what the five year contribution rule, which is what you stated earlier of like, well, you put your money in, you can at least get what you put in. You put in six grand and now the accounts were seven, you can at least get the six grand back even before the five year rule hits.

Okay, okay.

But the conversion one, there's some nuance to it. So I don't know that it's the same on poll.

I thought Bill threw you a softball. And Bill, you did it again. You may have stumped Matt Sorensen temporarily because people, if you know, you may not know Matt like I do. I'm going to field another question that does not have to do with Roth IRAs, because they. This is going to kill him until he gives you the answer. Now, he did ask, and this is a good one, Matt, his second question. This is good for everybody. The reason why you want to know this is with my kids. And I recommend for many of you, rather than doing a 529, you do a covered L IRA and a Roth IRA for your kids. They work for you and your business. You fund the Roth ira, they're covered L. You can pull out their Roth IRA contributions when it's time to go to college, tax free and penalty free. Whoa. Now that's what we're talking about here. You can put the money in the Roth, grow it tax free, leave it there, or pull out the contributions tax free for college. That's awesome. And a 529. You don't get to control the investment with a Roth ira, you do. So some of you may think, well, this is above me. I don't make that much money. Or whatever. No, if you have kids that are six or seven years old and you have a small business, let's start funding their Roth IRA for college.

I got the answer.

You got the answer. Okay. All right.

Okay. So when you. Okay, you're not 59 and a half yet. Right. I want to make sure we get the facts very specific. The answer is different depending on. Okay, you're not yet 59 and a half. You convert 10 grand. And you want to take out the 10 grand now, and you haven't hit the five year rule. So what you, the 10 grand you take out is not taxable.

Okay.

You get to get that back out because you just, you already paid the tax. Right?

Right.

But you have to pay the 10% early withdrawal penalty in the conversion scenario, unless you're 59 and a half. Now, let's say you were 60 and you did the same thing. Now you can get the conversion back out and you don't have the 10% early withdrawal penalty. So what they're trying to do, you have five years.

There's no five year rule.

Then, there's no five year rule on the amount converted. Now any of the gains, you know you're going to have a five year rule to get back out without taxes. But the amount converted itself can come back out, no tax. But if you're not yet 59 and a half, you're going to have a 10% early withdrawal penalty on it, which makes sense because they don't want people who are 50 that have like, let's say you got 100 grand in a traditional IRA that if you took a distribution of, you would have to pay tax on and the 10% withdrawal penalty. So you just say, well, I'll just convert it to Roth as, then I'll just take out the converted amount and skip the 10% penalty. So Congress knew you would do that. So they have this little special catch, all this little special catch, which is why I was a little hesitant to go on it. And that's how they get you. And that's how they get you.

That's how they get you. Okay, now this is a good second part to his question that's important for everybody. I really try to make sure the questions that are posed by our listeners throw a wide net. So many of you listening, don't just tune out and go, this shows too complex. No, hang with me. Let's say again, you could be a single mom just funding a little Roth IRA for your kid that's going to go to college someday and you have your Realtor, you're a small business owner. This is the concept. Bill's second half of the question is, Matt, in the year I pull money out of my Roth that's tax free and penalty free, let's say, what do I need to tell my custodian to make sure that the 1099R or whatever I get is accurate so that the IRS doesn't tax me or penalize me on that Roth distribution. What do you do?

You don't tell them anything. If it's a Roth account, they already know. You just have to make sure you process the distribution with them. And it's not taxable. They will know your age. You know all. Any IRA custodian has to track your age, what you put in, what your account is, what they've distributed. They know it's a Roth account. You don't worry.

Conversion dollars, in this very rule. They know what?

No. All right, slow down on the conversion. That is going to be on your 1040. So you are going to report that on. That's on your 1040 when you take the money. So let's say that you converted and then you took a distribution. Like, we're still gonna 1099 you, but you're then gonna take that on your 1040 and then claim, oh, I'm not 59 and a half yet. I gotta pay a 10% early withdrawal penalty. It's gonna be coded so you don't owe the tax from us, but you're gonna actually, it goes on your 1040. And you pick it up on, I think it's 8606 as a schedule, when you have taxable distributions, but custodians aren't tracking that because that's on your 1040 when you converted it. The year you converted it. That would have been on your 1040

bill. You drive me crazy. Good question.

I got a good one from Tiny in Florida.

Okay.

All right, good one. This is going for. For Mark Kohler. I love the name Tiny. Tiny from Florida. My husband is an independent contractor for a home repair company. He also started and created an LLC for his own lawn service company. Okay, so he got some independent contractor income as a home repair person, probably getting 1099. Also, husband's got an LLC for his lawn service company that's his own. My question is, can the home repair company pay him through his LLC? Also, we both have LLCs. Can we combine them under an S corp, or should we form S corps out of our LLC and combine them under an llc? Okay, a lot of different questions there. You got that?

Yeah, I kind of. I'm scanning other questions.

All right, let me all hit this. So, okay, so Tiny, if you guys, you're married, you have your own llc. Tiny, husband's got home repair company where he's an independent contractor, getting 1099 from his personal name, probably. And husband's got the LLC lawn service company. So all of those things can really funnel into one S corporation that you both Own. That's probably what I would do. Now. You can decide. We may want to look at this from an efficiency standpoint. Say let's just make one of these LLC the main company. Maybe it's the lawn service company. Maybe you want to keep the lawn service company separate because you've got other people that work in it. You got some liability issues. You got some people you 1099 or employees. And I don't know what you do tiny in your business for your llc. So you might want to have one S corp that you both own that own the lawn service company. And your husband could run landscaping, excuse me, the home repair and come into it. And then your income could come through your own LLC or directly into the S corp. But we don't want you to have each of your own S corps. You could consolidate and keep it simple and just go down to 1s corp or 1 llc that's taxed as an S corp and run all your income into that same entity. So yes, that home repair income can go into your llc.

Okay, now I also want to throw this out. What was the webinar last weekend? Wasn't that partnerships? No. Can you look at it real quick? I'm asking our producer what I did. I talked about this very topic for an hour last week, I think on YouTube, Facebook Live last week. Or I did it in our my webinar series that I do once a month. So one thing I'd recommend for any of you that want to dive deep on these types of questions. For 20 bucks a month I do a webinar and I share my screen and talk for an hour to two hours, sometimes just answering a specific question and diving deep. You can go to my website@markjcohler.com, sign up for that and get immediate access to the last 12 webinars as well as participating in the next one, which is frankly tonight, some of you won't get that in time.

But anyway, one thing I'd add on this too, if you don't mind is here's Tiny. Like you probably have a schedule C for your husband's independent contractor income where he's getting a 1099. You've got a schedule C on your personal return for the lawn service company. You've got a schedule C probably for the income coming through your llc, going on your guys tax return. You've got all these separate schedule Cs and things that could get audited. I would get rid of that, get it off your personal return, get these LLCs to own an S corp. Have one S corp where you're doing your taxes. S Corps are audited like 13 times less then a schedule C. So there's some audit protection. If you're making over 50 grand, you'll save on taxes. We have an episode on S Corporations you can look at. It's the best entity for any small business owner that makes 50 grand or more. You will save taxes for independent contractor income, lawn service, company income, home repair, you know, income, I don't care. Selling goods and services, commission income. You want to be in the S

Corp. Last week on my Facebook fan page, I went live on Thursday and talked about can my S corp own my LLCs and how do I partner? And this is exactly your question, Tiny. So please, any of you, I would suggest you do please like my page. Whenever I go live, you're going to get a ping. And I try to do posts every day of important tax and legal tips for small business owners. And this is one of them. So check that out on my feed on Facebook. It will not be on YouTube. All right, here's a question from Tirzah. Tierzon did a construction refi for a house. The deed was put into our name, which as many of you know, a title company or a lender is going to require. Because when you go out to refi and rehab a property or your own home, they want to see it in your name. Then after closing, if it's your own personal home, you deed it back to your family trust or your individual trust if you're single. And. And then if it's a rental property, you would put it back into your LLC. Banks, in 20 years, we've had one client with tens of thousands of deeds. Ever have a problem with the bank that was a little pissy that you transferred it back into an LLC or your trust. 99.9% of times, banks won't even notice or care. And it's important for asset protection and estate planning that after a refi you put the property back. Okay, that's the concept. Then she says the house is a rental and sorry, Tirzah, I don't know if that's male or female. I apologize. Tirzah says the house is a rental. Is it okay to keep the deed and the bank account in our name as long as we account for it separately? All monies are kept separate for personal from personal funds. Terza, there's really two issues you're dealing with here. You're dealing with the IRS and you're dealing with a potential lawsuit from a Tenant, a contractor, a guest of your tenant, something like that. From a tax perspective, I like what you're doing. You got a separate bank account. You're accounting for the rent and expenses separately. You put money in that account if you need it to do a repair. You pull money out when you got a little after a little cushion, and you kind of live off that cash flow. Love it. You want to make sure it's separate accounting because if you ever get audited, you want to have your crap together and you can show that that's good. The concern I'm seeing here, though, is if anything goes wrong with that property, a tenant falls, gets hurt, there's mold, there's asbestos, there's a party, there's a guest, a vendor, a contractor, anything. If that property is in your personal name, you're on the hook. They could garnish wages, they could lien your own personal home, they could get a judgment against you. All these crappy things that lawyers will do. And it's in. Depending on what state you're in, it can be very litigious in California. So what you want to do is make sure that you pop this property into an llc. It's okay. The bank's not. They've already sold your mortgage. They're not going to care. Go get an LLC. We have a paralegal service of 450 bucks. Any LLC in any state will set it up with the paralegals. You get all the pieces and parts. That's cheaper than legal.

Zoom.

When you check all the boxes you're supposed to at Legal Zoo and you'll know it's done right. Move the property into your llc. Now you're protected. Keep doing the accounting thing and you're going to have an LLC bank account. But let's make sure the lease is in the name of the llc, the title's in the name of the llc, and that you're showing that separation. So if anything goes wrong on the property, they might be able to get at the equity in the property, but that's it, the end. They can't get outside of that LLC and get your income or your other assets. So you may go, well, I'm in California. It's $800. So what? So be it. At $60 a month. Deal with it. Freaking get your crap together and get some protection. It's just a cost of insurance. That's the way it is. Matt, anything you want to add to that?

Yeah, just keep in mind with asset protection planning, and this is universal for anybody with an entity if you want the courts to treat your assets separate from the business like your personal assets, you don't want them to garnish your personal paycheck or go into your savings or checking account or you don't want them to get into equity at your home. You've got to treat the business separate. Okay? If you mix it all in to be one in the same and your name's all over stuff personally and it's on leases and deeds and everything and they're paying you personally, that ain't gonna work. Okay. That you've blown the corporate veil there. So you got to treat the entity and the assets separate.

Okay.

I like. Alright. I had a question from Curtis. Says I opened a self directed IRA 401k owned LLC with KQS. He says, can this LLC own a brokerage account? I'm having trouble getting a brokerage account open. Fidelity disapprove my application because I could not invest in retirement plans through an LLC like this. Other applications seem to show one individual behind the LLC. They seem to like that it is a 401k trust. Do you think I'm doing something wrong? Do you have a preferred brokerage? It's easier to work with. He says, thanks for all you do. Learned so much. He also says this is my first year using K&E CPAs. They saved me over $12,000 on my 2019 return compared to my old CPA. That was amazing. All right, good news. Okay, Curtis on the 401K LLC I don't like. This is just a general comment for everybody. Ira LLC, 401k owned LLC. I don't like doing brokerage accounts. In those you can and in fact TD Ameritrade has a specific form for IR LLC. Brokerage accounts, 401k LLC aren't as common but you know you can do it. Here's the problem. An llc, Sorry the LLC to a broker dealer, they are like a taxable entity. So they send tax notices to LLCs. When you have a retirement account like an IRA or a 401k that owns a brokerage account directly, they know, oh this is a retirement account, we don't do tax reporting on it. They treat it separate. It's easier for them, it's easier for you. So when you mix a 401k LLC, which we're really doing, 401k LLCs to own real estate or private investments and stuff, we're not doing them for brokerage accounts. Here's what you need to do, Curtis. Just open up a 401k account, brokerage account in the 401ks name. Don't do it through the LLC. Send money from the LLC back to your 401k and just trade through the 401k directly at Fidelity. I've had hundreds of clients use Fidelity for brokerage accounts with their solo 401ks. It's pretty easy. You're just trying to put a square peg in a round hole with the llc. And I do have an article, by the way, on ira, LLC and brokerage accounts.

And I would just add if you've seen a show of some sort where they go, you're on a need to know basis and you don't need to know in this situation. That's the bank. They don't need to know who owns the LLC and all this crap. You say the word 401k, their brains are going to explode. Just go in and say, I need a brokerage account and the name of this. The end. The more information you give a banker, obviously the more complicated it gets. Just keep it to a minimum.

But I still wouldn't do that. I still wouldn't. Don't do it in the LLC's name as my recommendation because they treat you like a taxable entity. Do it in your instance. I just do it in the 401k's name. Or if you're like an IRA LLC person listening. Use someone like TD Ameritrade that actually has an IR LLC brokerage account option. Yeah.

And it's tricky. So I apologize. I would recommend that I'd have that all of you read Matt's article on this because he really breaks down the steps on it and it's awesome. I'm sorry. I get a little jaded towards bankers. Any of you bankers listening? It's not you, it's the company you work for that drives you crazy. I've got a funny question from David here. He lives. At the end of his message he goes, even though we live in tax fournia. Taxifornia. So that would be California or Taxifornia. I've never heard that. I love it. I'm going to use it from now on. David. I'll send you a royalty check every time I do. That was a joke. Just a disclaimer. There he goes. We're moving to Florida asap. So tax free haven of Florida. Lots of bugs, little more humidity, but warm weather. All right. He says, we are starting a company and we have a partner that's a foreigner. They do not have a visa. They will not be coming into the US but they want to be a partner in our business, a minority partner. And she is going to take care of the manufacturing. Sounds like some manufacturing abroad. And then they're going to import it to the US and do some sales. And they want to partner with this person, hopefully to probably get a better relationship and a better attention and quality of product. Who knows, right? So Dave is going down this path and he said, what's the best way to partner up with this person? This kind of goes back to this S Corp. LLC stuff that we talked about a little bit ago. And this is right up the same alley. Typically, you're going to do an LLC with any foreign partners in your situation, David. You'd have your S Corp. It's a manufacturing, distribution, sales business. You're selling widgets. You're going to want an S Corp. But the LLC would be the parent company with this 10% non US owner. Now, that's the general rule. But you also need to take a moment to look at the tax treaty between the country this woman's from and the United States. If it comes to Canada. The LLC is a nightmare for a Canadian resident. It's just frustrating. NAFTA did not do any Canadians any benefit with the LLC structure in the U.S. so Canadians are going to have to go with a different situation and when we've got options there. But don't just set up the LLC and think you're done, because this person's going to have to do a tax return in their country and you could really jack it up. Our tax attorney in our office, she's wonderful. She 90% of the time, she's helping out our just domestic clients that are here in the US Doing their deals. But Christy Parker is fantastic. She is our international tax lawyer in our office. I know that sounds really over the top, but how many of you might buy an Airbnb in Mexico? I mean, how many of you maybe have a family member in another country and you might team up with them on a rental or a deal like this. So it's very, very common that even the average American could have a foreign operation or rental or partner. So talk to Christy Parker. She can help guide you through the setup of the proper entity with this other individual. But more than likely, David, you're going to use your S Corp, as Matt talked about earlier, that could be doing landscaping and real estate and all sorts of goodies, and partner with this llc. Matt, you're up. What do you got? Anything good? Lots of IRA questions. We're going to have to push Some of these over to the. We need to do a directed IRA open form. Hmm. Matt, I think you're muted, bud.

We're gonna get to the directed IRA open form. We'll get that episode five worth three. We got three in the popper already, so.

Okay.

All right, with the episode five, are

you ready for a PPP loan question?

Could I give you one that's I was gonna do? I got one right here from Naomi Holly's Hollywood question. Nope.

Okay, let's do it now before Matt answers this question from New York City. Matt Sorensen just wrote the number one article in America right now on entrepreneur.com on the PPP loan forgiveness application. If you have a loan less than 50,000. So if you just Google $50,000 or less loan application, PPP or whatever, you're gonna see Matt Sorensen's article come up. It's also in our newsletter this week. I want to encourage all of you, please make sure you're signed up for our newsletter. We just unveiled a new format for our newsletter. It's so much cleaner, faster, easier and user friendly. So that went out last night. But all of you, check out. Matt's article is excellent. Okay, Matt, what do you got on this topic?

Okay, this is a good question because it hits where a lot of people are at right now. She says, is it, is it definitely forgivable and do we have to submit an application or not? There seems to be constant changes to this being that is forgiven. Will it count as income to my business? Will it be taxable then? Okay, so we've got kind of a two part question here that are really the important things to know right now. Yes, you do have to submit an application. Now the forgiveness request, you've to do this by December 31st. Okay. Like that's the deadline to request forgiveness unless they extend it, which they probably, they may. I shouldn't say probably, they may. But right now you need to actually apply for forgiveness. And a lot of banks have been saying, hold off. We're hoping Congress is going to pass a bill because there's a bill pending, which I also wrote about an entrepreneur and you can go read that if you're into that. But for any loan, 150 grand or less, there's a bill pending that would say you don't even have to apply for forgiveness. You basically. Well, you do, but you basically have a one page app. Now here's the thing. The current app right now, if you're 50k or less, is simple, it is easy. You put your information down you check that it's 100% forgivable. You show the evidence that you paid those expenses. Done. Okay. It is really easy. No calculations, no equations, nothing like that. Like it like the regular, the full length PPP app looks like a frickin tax return. It's not hard, but it's basically like. It's kind of like a tax return. All these calculations, you gotta. You gotta carry this down to line that and subtract out this and you

know, so you make it sound miserable. I love doing tax returns. I was up last night working on my own.

I know.

15th tomorrow. Geez.

Contractor on his house.

My daughter Allison is in an accounting class right now in college. And every night she comes home, dad, can you help me with my accounting homework? And it's brought us closer together. Accounting can do that.

Accounting can do that.

Tax planning brings a family together.

It really does.

I love that. I need a T shirt like that. That's another teacher. Write that down. Corey. Tax planning beings that brings a family together. You can buy that T shirt on my website within a week.

Okay? Okay. All right. So now hold up, hold up, hold up.

Matt said one other thing I want to add to Matt. I'm just not colored. Screw off commentary. Let me throw this out.

Try to. I was going to try to come back to some substance here.

You are going to submit that application to your bank. The first person you should reach out to is your bank where you've got the ppp. They may have an online portal for this. They may be drop it off with a carrier pigeon or a little telegram, old man, I don't know. Get a hold of the bank, find out how they want it. I would encourage you to just this under $50,000 thing, just get it done. You cannot bank on the Congress doing anything right now. And who knows who's going to win the election next month. So all hell could break loose. Right. So the applications out. It's simple. You can read Matt's article and freaking knock it out. Drop it off at the bank. Done. That's my thing.

Yeah. I would just get it going. We've seen more and more clients just getting their PPP forgiveness apps into the banks. Now the bank has 60 days to go over it and then SBA has 90 to get it done. So there's. You still got a little ways to go before it's finally forgiven. Now here's the big question that Naomi asked too. This is part two, which is very important. Being that it's forgiven, she says, will it count as income to my business. Will it be taxable then? Yes. The IRS has came out and said there's some lot of, there's debates on this. The AICPA, the organization for CPAs, has been fighting this. IRS came out and said there's current tax law that, that basically says if debt is forgiven and you use that money for business expenses, you no longer get the business expense cause the debt was entirely forgiven.

Or you claim the forgiveness of debt income and take the write off. Either way.

Yeah, either way it ends up being its income. Okay, so like let's say you got a loan for 50 grand, you got a PPP loan for 50 grand, that 50 grand is forgiven. You use the whole 50 grand on business expenses and you expense 50,000 of it. You paid it all out on payroll, which is an expense you're not getting. You're not getting that 50,000 expense. Or if you did take the 50,000 expense, you got to book in 50,000 of income.

Matt, what do you think about Congress in the current legislation? Do you think that they're going to address this too and say nope, nope.

Here's kind of where the debate's gone on it. Well, there's some businesses that have gotten PPP money that frankly didn't need it. And there's a lot of businesses that got it that are in the crapper. And for those ones that are in the crapper, they're going to have so many expenses then getting this PPP money, it's not going to matter. They're not going to have to worry about really paying taxes on it. And so they've tried to say the IRS wants the income. I mean, they want, they want the income. They want to tax it. Of course, that's their job. You know, tax this. Can we tax that? What about this? You know, they want to tax whatever they can. Now here's the reason why the AICPA is fighting it. Other professionals and why we think it. I was actually surprised by it. The statute itself, the original statute, the CARES act that had PPP said forgiveness, that the amount if your PPP loan is forgiven will not be counted as forgiveness of debt income. It like specifically said that in the statute. And so everyone had that expectation. But the IRS did this like 180 on it and said actually despite what the statute says, there's existing case law to the contrary. And that's. We'll see. I mean, it's. Someone's gonna fight this. It's gonna get fought out in the courts.

It will, it will go to, it'll Go to tax court immediately. And I don't care if there's case law. Statutes override case law if it's clear.

I know, I know, I know.

Okay, let's keep moving here. Rather than get into the theoretical issue, Hollywood also has a question from Utah on this very topic and adds another twist. She says, I have three PPP loans, three different businesses. One is under 30 grand, the other two are in the 54 and $52,000 range. I've spent all the money the way I was supposed to. I received them legitimately. And she said, will these other two loans be forgiven up to the $50,000amount under this deal? My answer, I do not think so. Right. It's. Well, no.

Well, the 50,000 thing basically only tells you which form you can use. So. So there's no 50,000 forgiveness issue. That's just. Did you get a loan for 50,000 or less? If you did, you get to use the simple app where they were what base sense getting called. If you had a loan between 50 and 150, you get to use the EZ app. If you had a loan of 150 grand or more, you got to use the regular full blown app. It's more like a frickin tax return. So you should be able to just use the 50,000 app on those. There are aggregating rules though in the application you have to look at. So you may actually have to use the EZ. If hers go over 150 which it sound like they did when you added them up or sorry, they go over 50, she may need to use the Easy app unfortunately. But the easy app's not too bad.

Yeah, and I've got an article on the Easy app under 150 on entrepreneur. Matt has the article on anything under 50. Basically if it, if it was worth more money, they wanted me to write it because it was a little more legit. But for Matt, he. Did you like that? That was kind of a dig. Yeah, that was just kind of being fun, jovial. Yeah, this is just fun bantering. That gave me a dirty look on YouTube. No, I'm just joking. Okay. Now I would say this to clarify, Holly, if you have a loan for 54,000, you're not going to use the easy app, the under 50 app, you're going to go to the easy app that's under 150,000. If you have a loan for 52,000, just that loan amount is going to kick you into the higher application. If you have a loan under 50 then you get to do it for this one. So I don't. You're not going to just say, oh, I have a loan for 75 grand. I'm going to get the first 50 forgiven by doing this method? Nope. It's the total loan amount that drives you into the right proper application. So now, FYI, next Tuesday on Entrepreneur Nation, on their website, on the Facebook, on YouTube, we are going to be live with Entrepreneur as their senior tax advisors breaking down the PPP application process. You'll get a notice on our email subscription list. If you're subscribed to our newsletter, we'll get that information on how to attend. But if you go to entrepreneur.com right now, they are already advertising this webinar for next Tuesday with us and you can register right there. So it's right on the homepage, entrepreneur.com so register for that webinar if you have more questions. We will not field any more PPP questions today. We're going to save them for next Tuesday.

Like it? All right, I got a good question on LLCs here. This is from Brandon. We're going back to back Utahns. We got another Utahn question here. Okay. He says, I have separate operational LLC for assisted living facilities in multiple states. Okay, good. We're working with Kevin in your office to set up a holding entity for these operational llc. Maybe it's an S corp, which these are the operational llc, presumably the operating income under this structure. Well, let's hold off here.

Maybe.

Maybe I'm wrong.

I know. I was going to say you're making some presumptions.

I may be wrong. He says, under the structure, am I able to roll income from each entity into the holding entity and then roll it back out to one of my operational entities? I'm specifically wondering if I could use this strategy to rapidly pay down debt service on one of our facilities to refinance and pull our money back out for the next opportunity. Okay, sounds like these, when you say operational LLCs, it sounds like this is kind of the property specific entity for that location. And you've got a holding entity that is the main company.

Now let's do this. Matt, we're going to give this a shot. Corey, you might have to zoom in. I'm going to take this yellow pad and if you are watching on YouTube, this is critical. So you may want to fight. I think it looks okay. You're ready. Okay. Corey says he's got my iPad ready to go. We're going to do a little diagram now for those that are listening only on Itunes. Let me describe what I want to do. I want to take a piece of paper and draw a line down the middle. Now, Brandon, Kevin is a shark cookie. So if you're already working with Kevin in our office, make sure he reviews this. With you on the left side of this line on the paper, you're going to have your operations. Now, that is what is providing the services in these assisted living facilities. The operational entities do not own the building. They are running the facility. Some of my assisted living clients don't own the buildings. Sometimes they do, but if they do, think of Applebee's. You've got the Applebee's restaurant. You got the Applebee's building. So, Brandon, it's important that on the holding side, you may have an LLC to own the assisted living facility.

And then we say holding side. We're saying the property side, like the property real estate, okay? We've got. We want the real estate to be owned in a separate family of companies here, okay? Then we do the operating entity that operates the facility, that receives the income, that provides the services, that has the employees, okay? We want to separate all that operating stuff, which can cause liability from the asset, the real property itself. So there's. There's going to be two family of entities here.

Okay? Now, and I'm sticking with the yellow pad here just to. I apologize. Corey was trying to, on the fly, make this happen. But in this situation, Brandon, if you had one facility and one building, let's just simplify it down to that. You'd have one entity on the left that is running the operations, and you have one entity on the right that's holding the building. The operational entity would pay rent over to the building. The operational entity needs to be AN S Corp 9 times out of 10. Now, if you have multiple operational entities. When Kevin says he's setting up one llc, I'd rather have him use the word parent. I'm going to bring that up with Kevin. I like a parent LLC for all the operational LLCs, and that parent LLC would make an S election. We use the holding word for this side of the equation where you're going to have a holding LLC that holds all the LLCs that collect rent from the operational side. This is a whole chapter in my book, tax and legal playbook. When you meet with one of our attorneys, and we actually have a staff meeting with our attorneys right. When we're done recording this, and I'll bring that up with Kevin to make sure we use that vernacular, that terminology. So parent LLC to hold operations holding LLC to hold buildings. LLCs. Anyway, Matt, anything you want to add? Sorry, no.

Yeah, that's great. I think you can see the complexity of it when you get multiple locations, but it's basically just doing more of the same and maybe adding in the holding entity as needed. So one location. Just keep in mind, this is gonna be the dentist with that owns the building. This is the retail store that sells stuff that has. That owns their building. Okay. You want the. The owning of the company. Sorry, the real estate in one entity, llc. The operations in a separate. That's the S Corp. That's the. That's the most plain, basic way to do it.

Matt, as we jump around to different topics, because I Could I bring up IRS communication. Would you be cool with that?

That sounds exciting.

Yeah, let's just.

All right, everybody buckle up. Mark, IRS communication.

This is from Jeff and Elizabeth.

And they say, elizabeth, you asked for this. Okay.

Yeah, that's right. You asked for it. You got it. Toyota. Okay. Jeff and Elizabeth says, this is a bizarre question, but so is the rest of 2020. Fair enough. They said, we've received several letters from the irs. Yes. We've had others in the past, and this looks definitely official. Okay. Stating that they have not received our 2018 tax return. And they keep telling us to submit or they're going to unleash the jaws of he double hockey sticks. Right. So our CPA says he filed the 2018 return electronically and has confirmation to support this. We have sent a written reply with this information and. But still receives similar communication that we need to file for the tax year of 2018. What else should be done? Jeff and Elizabeth, at this point, you have two options. One is you pick up the phone and just call the irs. Call the number on that letter and say, didn't you get the info we sent? Can I fax it? Can I. How can I get this to you? What's going on?

Did you not call the IRS lately?

Yeah.

It is impossible to talk to someone. I'm not kidding. Even after, like, an hour and a half, like, they just hang up. It is impossible to get 3D1 the IRS. Yeah. You really? Like, I had to deal this. Deal with this. And practitioners can get a different way through. But, like, anyways, it was a joke.

Luckily.

I mean, I was multitasking while the clock was just ticking on my cell phone. I was over an hour and a half.

When was this?

It's like a week ago.

Okay. All right. I talked to the ira. Different service offices and different numbers might be an issue. We have a practitioner hotline, so I might be a little jaded so I can. That's through a little quicker. But Jeff, the first thing I would do and calling on the eve of October 15th is not a good idea either. The IRS is going to chill out come 1st of November, so make a phone call after the 15th. That might help. Number two, you need to go to your CPA. This is their responsibility. You paid them to electronic file your return. If the IRS doesn't get it, it's their job to find it, solve it. If it's ever a mistake of ours, we would not charge for the time and take the time to do that for you and comp it if we made a mistake. But sometimes the IRS is just jacked up. So many people think the IRS is smarter or the system is better than it really is. You could mail this crap in and it doesn't get recognized for months. So don't give up. Just I would turn it to your CPA and say deal with this and get mad, but I don't know how much you paid. Is it your brother in law? I don't know. So. But Matt, here's what I wanted to bring up too on the communication thing. People, this is so important. 2 comments. One, the IRS will never call you. I got called by the IRS about six months ago. Hey, this is the IRS and you owe 10. You know, it wasn't even that much. It was like $1,000. You can pay it right now or else we're going to record a lien. And I'm like, I just wanted to freaking unload. But we've had other professionals tell us if there's a scammer on the phone. You don't antagonize them further. You don't know what they could do to your privacy or identity. Just say, oh, thank you, I'll send you a letter, see you later, bye. Or say, I can't hear you, hang up. Don't antagonize them. But the IRS people, I have to say this will never, ever, ever call you. So I'm glad to see that Jeff and Elizabeth are dealing with written communication from the irs. Matt, I think you had someone call you to that. I mean this has happened.

I've had the, you know, texts and the voicemails come in and they're hilarious of like, you know, you are gonna be. A warrant is gonna go out for your arrest and it's like the auto recording. A warrant is gonna go out for your arrest if you do not call back within 24 hours.

Did you record that when you're in college? Is that your voice that I heard?

No. You know, every once in a while, I can nail some impersonations. I just, you know, certain impersonation.

It's natural, so people ignore those. Number two, if you cannot pay your taxes on October 15th, which is tomorrow, we're trying to get this podcast up by the end of the day. If you cannot pay your taxes by tomorrow, the 15th, at least file your return. The penalty for not filing is far, far, far worse than not paying. Now, Matt and I talked about what to do if you can't pay the irs. We've been through this before. We talked it on our podcast. Please go back and listen to those. But I thought. Matt, on the eve of October 15th, I just wanted to say, wait for official written communication. Don't listen to phone calls, file your return, and don't give up with the irs, with Jeff and Elizabeth. If you do not deal with this, it will only get worse. So make some phone calls and watch a movie while you're on hold until they pick up. Anything you want to add on IRS protocol, Matt?

Nope. I got a nope. I think we're good.

Hey, you choose the last question.

Okay. Last question.

I don't. You want to do two more? We can do two more.

I got. Okay. This was from. I believe this is no name. I believe it's Judy. Let's say it's Judy.

Okay.

She asked two questions, one on ppp. What I'm just gonna say. Stay tuned for Tuesday to the webinar Mark and I are doing with Entrepreneur. The other one is on stimulus checks. This is interesting. She said, while I was finishing my tax returns this year, I realized I should have seen a certain amount of money in my stimulus. I did not get a $600 stimulus check. How are we supposed to recoup this money from the irs? There's no spot on the IRS account site or place to get the correct or remainder of the money. This is frustrating to be shortened by the IRS when another round may be coming as well. So here's the answer. This is happening on your 2020 return. So when you file your 2020 return, the stimulus checks were basically in advance of money on your 2020 return. So if you qualified on 2020, because you hadn't filed 19 yet, and they, like the IRS, didn't know if you qualified, you're going to get it in 2020. So don't worry. You haven't lost it. There's no way you're going to be able to go to the IRS now and get your 600 bucks. But you will get it if you qualified because you got to hit the 2020 income requirements. You will still get the stimulus check, which will basically be a credit on your taxes when you file in 2021, as you're doing your 2020 taxes right by April 15, 2021. So don't be frustrated. It sucks. I know you'd probably rather have it now, but the money is not lost. You will still qualify. So long as you're hitting 2020 within the numbers three this year, you'll get it.

Okay, I like it. Matt, just a quick note. David, a US expat, which means, for some you don't know, that means he's a bona fide resident or he's a US citizen living abroad full time in Singapore in this example, is trying to manage his Roth IRA the best way to set up brokerage accounts when you're living abroad, David? And then at the end of his question, he says he set up a consultation with our firm this morning. I'm going to make sure that your question gets to Christy Parker. You should be on her calendar. And if any of you are, we had another question from someone in Germany. So around the world, people are doing business in the us they're not mega millionaires and they need some help. And we're trying to be there for you. So make sure if any of you are dealing with kind of a foreign issue, either living abroad or bringing on a foreign investor or whatever, you've got to get on Christy's calendar. That's who we're trying to make our expert in this area. Matt and I only have so much brain capacity and the rest is full of malted hops and resin. Bong resin. But that. It's a quote from Tommy boy. What is that from?

What is that?

Tommy boy.

Tommy boy.

He goes, was there a niner in that? He goes, you're a thick candy shell. Yeah, save it, Tommy. Your head is clogged with malted hops and bong resin. Okay, now, so everybody please get with Christy on a foreign issue. You will love it. Also, I was going to play the quote from Irwin F. Fletcher that I cannot have my wages garnisheed. And that's a great quote from Fletch, since Matt was talking about garnishes being, you know, garnishing of wages earlier.

Yeah.

So

every time you bring in Fletch. Well, did you have a final question or are we signing off here?

I'm having fun. I just Want to keep going? I really do. Someone's asking about dental insurance, man. I appreciate your vote of confidence, but man, I don't know. I don't know if I can handle that one, Nate.

I'll see what I look at. Dental insurance, taxes. Can't believe there's a podcast that would dare wade into the waters of those categories all in once.

Yeah, I mean, Matt Sorence can walk on water and play the. Oh, did you know last week on our show we played your riff from your guitar as the takeout of the show.

You knew that? Running down a dream from my Instagram. That's a Tommy.

Is that what it was? Yes, it was. Go ahead and make that announcement. This is Matt on the electric guitar. Will he take us out today on the show? Can we do that, Corey? Same song, Matt. Is that all right?

Yeah, I love it.

All right.

Yeah, that was. Yeah, it wasn't that great, but it was a good song.

You know what, here's what I think we're gonna do. Any of you that asked a SEP IRA 401k self directed question, we're just gonna record a open forum with these questions. We got to do it today or tomorrow, Matt. And just do it for Directed IRA podcast. There are so many questions here. So if any of you feel like. What? I didn't get that question answered, please go subscribe to the Directed IRA podcast and you will get a ping and we will field your questions there. Okay, I'm going to do one on S Corps. Matt, you got to choose one question that's not self directed.

Okay, one question is not self directed.

Yeah. You got one in there? I got one.

Okay, go for it.

Yeah. This is from Daniel says I was. So many compliments to everybody saying thank you for the show. We appreciate your following. Please share the show with everyone and give us a five star review and can. Okay. I was operating in a delivery business from the beginning of this year to about April when the virus went rampant. Let's just say it greatly affected my business. I don't quite know if I will continue at this point due to rates. What do I need to do to make sure all my taxes are paid for and taken care of? Also, since I won't be operating my business, do you think I should terminate my S Corp for the time being? Would this help me avoid any taxes issue? This is a great question for any of you, including Daniel, where your business was greatly affected in a bad way this year. Matt alluded to this earlier. You're going to have a lot of Write offs. Track all your expenses. Milk it for all it's worth. That loss can be carried back three years and get you a refund. Or it can carry you forward and you can use it in the future. A lot of people have just thrown their arms up and go, yeah, my business died. The end. No, you track every freaking expense down to the broom you use to sweep up the shop when you close the door. I mean, everything you paid for and got burned with this year is a write off. You milk it because that write off will help you in prior years or years to come. And number two, don't say. And don't be offended with my bluntness here, but don't say you're giving up on entrepreneurship or you're giving up on a future small business or the whole thing. Guys, you got blindsided. But something that was completely outside of your control. Pick yourself up. Remember, having a small business is going to help you for many, many years to come. Take what you learned from this experience. Don't kill your S Corp yet, Daniel. Let's see how the year plays out. If anything, the S Corp is going to reduce your chances of an audit. Throw every expense you can into that S Corp return for 2020. You can file that sucker next spring. Milk it, but don't get rid of the S Corp and people. We've met with so many thousands of clients that have just been hurt by this pandemic. Others, it's just. What's funny, Daniel? You say you have a delivery business and Covid hurt you. That is odd to me. You know, everybody's like, home delivery, home delivery. You know, So I don't. I don't know what your business was, but some businesses have done phenomenal. Some have been destroyed. So just don't throw in the towel on entrepreneurship, on life itself. Things will bounce back. Hang in there, people. It's hard. Matt, that was a touchy feeling moment. And you're on mute, by the way. But I, you know, I was touchy feeling. You know, I can throw down some tears if I need to.

I like that. You know, that was. I appreciated that. I liked it. Okay, let me get mine, though. I got.

It's all you.

Okay. This is an hsa.

However, I do reserve the right to make a comment at the end of yours.

Okay. All right. That's without objection. I'll yield a little. I'll yield 30 seconds of my time for that.

Okay.

All right. Okay. He says this. Nicholas says, I have a. I work at a day job and I contribute to a 401k and an HSA. I also have a small business with a side hustle. What is the max I can fund in a 401k and HSA from my business on the side and my day job. Well, same actually. Let's hit the HSA. If you're an individual, your max is 33,550. 3550 individual, 7100 family. Now, you can throw into those max. Like I don't know if your company's throwing in on your day job, some of that, but max it out. But you're not going to get like another HSA that you can say, well, this is in my side hustle. That's not even a thing. HSAs are individually based, but you couldn't double up on that and do, let's say, 7100 family with the day job. 7100 in your small business. Okay, it's just 7100 period.

Okay, now before you go to the 401 gate, could I make a comment on the HSA?

All right, 30 seconds of time.

Okay, people, this is what I recommend in. What's his name?

Nicholas.

Nicholas. This is what I recommend, Nicholas. For all my clients in this situation, you can have two HSAs and you could fund one from your business and one from the day job, but your max contribution would be maybe 3,001 and 4,100 in the other. So like Matt said, the 7,100 is the same, but you could have two or three HSAs to get there. So what I like to see clients do is play in the HSA at work up to the point that they do any matching or they throw money in there for you. Then go open your HSA at directed IRA Tonight you can open an account online. In the middle of the night, open up your hsa. That's where you put the rest of the contribution. So if your work puts in a thousand, put the rest up to 6100. If your family over in your self directed HSA from your small business, then you can control that investment and do whatever the heck you want with it. If you put money in at the work hsa, more than likely you're not gonna be able to control it. So it comes down to control to me. All right.

Yeah. Now it's the same answer on the 401k. I love how you said that. Because the 401k is the exact same. You can have a separate solo 401k that we can set up in the side business. And in November Is our solo case special, by the way, where we discount solo case set up for 2020. So but the total max you can put in is still 57,000. So play in the day job 401k up to the point they match, just like Mark said. Similar strategy on the hsa. And then the rest of the money you could self direct and do in a solo 401k, but you don't get 57,000 at the work. 401k, the day job and the side hustle. If you're a small business solo 401k. If you dropped in 20, let's say into the 401k at your work, you know your day job, you're going to get 37,000 left. You could be possibly throwing in over at your small business solo K on the side.

Love it. Now I'm gonna. May I have my 30 seconds, moderator, or are you gonna cut me off like Trump?

Yeah, I was gonna say that we're gonna be like Trump and Biden here for a second. Go ahead, go ahead. Would you shut up, man?

If this was a presidential debate, we'd get nowhere. We'd just be cutting each other off.

Wasn't that the famous Biden line that. Will you shut up, man?

Okay, recommendation for all of you. There is a art and a strategy to maximizing the 401k between work and your side hustle. Hence, I shot a video. It's on YouTube, almost 10,000 views. Please share it with your friends and family. Just type on YouTube sweet spot 401k. You don't have to type my name or anything. I dominate this space. So I kind of articulate in this video that is 6 minutes and 1 second long. And I kind of break down how to play with the 401k at work and in your side hustle. To get the sweet spot in your maximum contribution, make sure you type sweet spot 401k and nothing else. I'm not liable for that search, Matt. That's all I had to add.

All right.

Okay.

Well, great. Main street business podcast. Thanks everyone for all the questions you guys sent in. Thanks. For those listening in and sharing the show with your friends and family. If you like it, give us a five star review. For those of you on YouTube, Mark is showing you his nifty diagram right now. It's very nice.

Corey took care of this, threw it on our iPad. We did not shoot it on the screen, but you're gonna get used to that. Oh, and sign up for my basic or advanced class this weekend. Yeah, yeah. And we'll break this down and you can watch it over and over again. Up to six months. It's recorded. So cool. Markjcoh.com Matt, you're awesome. Matt's really talented. You got to listen to this riff. Is it started yet?

I want to hear it. Make sure I can hear it, too, okay?

All right.

All right, well, send us out. This is Tom Petty running down a dream, baby.

See you next week, folks.